The Pakistani Spectator

Warren Buffett was born in Omaha, Nebraska in August of 1930. As the son of a local stock broker, he was likely exposed to markets at a young age. As he got older, Buffett had a few successful entrepreneurial ventures, making him consider proceeding straight into business rather than going to college. His father, however, overruled him on this.

One of his mentors, arguably the most influential was Benjamin Graham. Graham’s philosophy had such an impact on Buffett that he enrolled in Columbia Business School to study directly under him. In Buffett’s own words: “I’m 15 percent Fisher and 85 percent Benjamin Graham.”

As Buffett, would often say about Graham’s teachings: “The basic ideas of investing are to look at stocks as business, use market fluctuations to your advantage, and seek a margin of safety. That’s what Ben Graham taught us. A hundred years from now they will still be the cornerstones of investing.”

Has repeatedly criticized the financial industry for what he considers to be a proliferation of advisors who add no value but are compensated based on the volume of business transactions which they facilitate. He has pointed to the growing volume of stock trades as evidence that an ever-greater proportion of investors’ gains are going to brokers and other middlemen.

Has emphasized, the non-productive aspect of gold in 1998 at Harvard: “It gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”

Has stated, that he only paid 19% of his income for 2006 ($48.1 million) in total federal taxes, while his employees paid 33% of theirs despite making far less money.

He, believes that the U.S. dollar will lose value in the long run. He views the United States’ expanding trade deficit as an alarming trend that will devalue the U.S. dollar and U.S. assets. As a result it is putting a larger portion of ownership of U.S. assets in the hands of foreigners. This induced Buffett to enter the foreign currency market for the first time in 2002. However, he substantially reduced his stake in 2005 as changing interest rates increased the costs of holding currency contracts. Buffett continues to be bearish on the dollar, and says he is looking to make acquisitions of companies which derive a substantial portion of their revenues from outside the United States. Buffett invests in PetroChina Company Limited and in a rare move, posted a commentary on Berkshire Hathaway’s website why he will not divest from the company despite calls from some activists to do so.

He, believes government should not be in the business of gambling. He believes it is a tax on ignorance.

Buffett’s speeches are known for mixing business discussions with humor. Each year, Buffett presides over Berkshire Hathaway’s annual shareholders’ meeting in the Qwest Center in Omaha, Nebraska, an event drawing over 20,000 visitors from both United States and abroad, giving it the nickname “Woodstock of Capitalism”.

Berkshire’s annual reports and letters to shareholders, prepared by Buffett, frequently receive coverage by the financial media. Buffett’s writings are known for containing literary quotes ranging from the Bible to Mae West, as well as Midwestern advice and numerous jokes. Various websites extol Buffett’s virtues while others decry Buffett’s business models or dismiss his investment advice and decisions.

He, favors the inheritance tax, saying that repealing it would be like “choosing the 2020 Olympic team by picking the eldest sons of the gold-medal winners in the 2000 Olympics”. In 2007, Buffett testified before the Senate and urged them to preserve the estate tax so as to avoid a plutocracy. Some critics, including John Berlau writing in the August 23, 2004 issue of the National Review, have pointed out that Buffett (through Berkshire-Hathaway) has a personal interest in the continuation of the estate tax, since they have benefited from the estate tax in past business dealings and are also involved in developing and marketing insurance policies which protect policy holders against future estate tax payments.

He, has been recognized as most responsible for FASB 123 (r), or Stock Option Expensing on the GAAP Income Statement. When asked about the subject at Berkshire Hathaway’s 2004 annual meeting, he compared the United States Congress and the Securities and Exchange Commission’s decision to override FASB, who wanted to consider company-issued stock-option compensation as an expense, to a bill proposed in the Indiana house for Pi to be changed from 3.14… to 3.20.

Has held fundraisers for both Hillary Clinton and Barack Obama for president. He has not indicated for whom he will vote, but he has expressed that both would make “great Presidents”.

Has called the 2007-present downturn in the financial sector “poetic justice”

Was inducted into the Junior Achievement U.S. Business Hall of Fame in 1997.

1943: (13 years old)
Buffett filed his first income tax return, deducting his bicycle as a work expense for $35.

1945: (15 years old)
In his senior year of high school, Buffett and a friend spent $25 to purchase a used pinball machine, which they placed in a barber shop. Within months, they owned three machines in different locations.

1949: (19 years old)
In 1949, he was initiated into Alpha Sigma Phi Fraternity while an undergraduate at the Wharton Business School at the University of Pennsylvania. His father and uncles were also Alpha Sigma Phi brothers from the chapter at Nebraska, where Warren eventually transferred.

1950: (20 years old)
Buffett enrolled at Columbia Business School after learning that Benjamin Graham and David Dodd, two well-known securities analysts, taught there.

1951: (21 years old)
Buffett discovered Graham was on the Board of GEICO insurance at the time. After taking a train to Washington, D.C. on a Saturday, Buffett knocked on the door of GEICO’s headquarters until a janitor allowed him in. There, he met Lorimer Davidson, the Vice President, who was to become a lasting influence on him and life-long friend.

Buffett graduated from Columbia and wanted to work on Wall Street. Buffett offered to work for Graham for free but Graham refused. He purchased a Sinclair gas station as a side investment, but that venture did not work out as well as he had hoped. Meanwhile, he worked as a stockbroker. During that time, Buffett also took a Dale Carnegie public speaking course. Using what he learned, he felt confident enough to teach a night class at the University of Nebraska, “Investment Principles.” The average age of the students he taught was more than twice his own.

1952: (22 years old)
Buffett married Susan Thompson.

1954: (24 years old)
Benjamin Graham offered Buffett a job at his partnership with a starting salary of $12,000 a year. Here, he worked closely with Walter Schloss.

Susan had her first child, Howard Graham Buffett.

1956: (25 years old)
Benjamin Graham retired and folded up his partnership.
Buffett’s personal savings are now over $140,000.
Buffett returned home to Omaha and created Buffett Associates, Ltd., an investment partnership.

1957: (27 years old)
Buffett had three partnerships operating the entire year.
Buffett purchased a five-bedroom, stucco house on Farnam Street for $31,500.
Susan was about to have her third child.

1958: (28 years old)
Buffett had five partnerships operating the entire year.

1959: (29 years old)
Buffett had six partnerships operating the entire year.
Buffett was introduced to Charlie Munger.

1960: (30 years old)
Buffett had seven partnerships operating the entire year.
The partnerships were: Buffett Associates, Buffett Fund, Dacee, Emdee, Glenoff, Mo-Buff, and Underwood.
Buffett asks one of his partners, a doctor, to find ten other doctors who will be willing to invest $10,000 each into his partnership. Eventually, eleven doctors agreed to invest.

1961: (31 years old)
Buffett revealed that Sanborn Map Company accounted for 35% of the partnerships’ assets.

Buffett explained that in 1958, Sanborn sold at $45 per share when the value of the Sanborn investment portfolio was $65 per share. This meant buyers valued Sanborn at “minus $20″ per share, and buyers were unwilling to pay more than 70 cents on the dollar for an investment portfolio with a map business thrown in for nothing.

Buffett reveals that he earned a spot on the board of Sanborn.

1962: (32 years old)
Buffett’s partnerships, in January 1962, had in excess of $7,178,500 of which over $1,025,000 belonged to Buffett.
Buffett merges all partnerships into one partnership.
Buffett discovered a textile manufacturing firm, Berkshire Hathaway. Buffett’s partnerships began purchasing shares at $7.60 per share.

1965: (35 years old)
When Buffett’s partnerships began aggressively purchasing Berkshire they paid $14.86 per share while the company had working capital (current assets minus current liabilities) of $19 per share, this did not include the value of fixed assets (factory and equipment).
Buffett took control of Berkshire Hathaway at the board meeting and named a new President, Ken Chace, to run the company.

1966: (36 years old)
Buffett closes the partnership to new money.
Buffett wrote in his letter “unless it appears that circumstances have changed (under some conditions added capital would improve results) or unless new partners can bring some asset to the partnership other than simply capital, I intend to admit no additional partners to BPL.”

In a second letter, Buffett announced his first investment in a private business — Hochschild, Kohn and Co, a privately owned Baltimore department store.

1967: (37 years old)
Berkshire paid out its first and only dividend of 10 cents.

1969: (39 years old)
Following his most successful year, Buffett liquidated the partnership and transferred their assets to his partners. Among the assets paid out were shares of Berkshire Hathaway.

1970: (40 years old)
As chairman of Berkshire Hathaway, began writing his now-famous annual letters to shareholders.

1973: (43 years old)
Berkshire began to acquire stock in the Washington Post Company. Buffett became close friends with Katharine Graham, who controlled the company and its flagship newspaper, and became a member of its board of directors.

1974: (44 years old)
The SEC opens a formal investigation into Warren Buffett and one of Berkshire’s mergers.

1977: (47 years old)
Berkshire indirectly purchases the Buffalo Evening News for $32.5 million. Anti-trust charges brought.

1979: (49 years old)
Berkshire began to acquire stock in ABC. With the stock trading at $290 per share, Buffett’s net worth neared $140 million. However, he lived solely on his salary of $50,000 per year.

Berkshire began the year trading at $775 per share, and ended at $1,310. Buffett’s net worth reached $620 million, placing him on the Forbes 400 for the first time.

1988: (58 years old)
Buffett began buying stock in Coca-Cola Company, eventually purchasing up to 7 percent of the company for $1.02 billion. It would turn out to be one of Berkshire’s most lucrative investments, and one which he still holds.

1990: (60 years old)
Scandals involving Greenberg and Gutfreund appear.

1999: (69 years old)
Buffett is named the top money manager of the 20th century in a survey by the Carson Group, ahead of Peter Lynch and John Templeton.

2002: (72 years old)
Buffett entered in $11 billion worth of forward contracts to deliver US dollars against other currencies. By April 2006, his total gain on these contracts was over $2 billion.

2004: (73 years old)
His wife, Susan, passes away.

2006: (75 years old)
Buffett announced in June that he would gradually give away 85% of his Berkshire holdings to five foundations in annual gifts of stock, starting in July 2006. The largest contribution will go to the Bill and Melinda Gates Foundation.

2007: (76 Years old)
In a letter to shareholders, Buffett announced that he was looking for a younger successor or perhaps successors to run his investment business. Buffett had previously selected Lou Simpson, who runs investments at Geico, to fill that role. However, Simpson is only six years younger than Buffett.

2008: (77 Years old)
Buffett becomes the richest man in the world according to Forbes
Mr. Buffet married Susan Thompson in 1952. They had three children, Susie, Howard, and Peter. The couple began living separately in 1977, though they remained married until her death in July 2004. His daughter Susie lives in Omaha and does charitable work through the Susan A. Buffett Foundation and is a national board member of Girls, Inc.

On his 76th birthday, he married his longtime companion, Astrid Menks, who had lived with him since his wife’s departure. Interestingly, it was Susan Buffett who arranged for the two to meet before she left Omaha to pursue her singing career. All three were close, and holiday cards to friends were signed “Warren, Susie and Astrid” (as per Roger Lowenstein’s book, Buffett: The Making of an American Capitalist). Susan Buffett briefly discussed this relationship in an interview on the Charlie Rose Show shortly before her death, in a rare glimpse into Buffett’s personal life.

He, remains an avid player of the card game bridge. He has said that he spends 12 hours a week playing the game. He often plays with Bill Gates and Paul Allen.

In 2006, he sponsored a bridge match for the Buffett Cup. In this event, modeled on the Ryder Cup in golf (and held immediately before it and in the same city), a team of twelve bridge players from the United States took on twelve Europeans.

In 2006, he auctioned his 2001 Lincoln Town Car on eBay to raise money for Girls Inc.

Warren Buffett is currently working with Christopher Webber on an animated series with DiC Entertainment chief Andy Heyward. According to information presented by Buffett at the Berkshire Hathaway annual meeting on May 6, 2006, the series will feature Buffett and Munger in roles and the series will teach children healthy financial habits for life. Cartoon drawings of Buffett and Munger were displayed throughout the events during the weekend and the special movie before the meeting began was in animation form by Heyward.

In December 2006 it was reported that Mr. Buffett does not carry a cell phone, does not have a computer at his desk, and drives his own car, a Cadillac DTS.

Buffett’s DNA report revealed that he is not related to the singer Jimmy Buffett and that his paternal ancestors hail from northern Scandinavia, while his mother’s side most likely has roots in Iberia

Philanthropy

In June 2006, Buffett gave approximately 10 million Berkshire Hathaway Class B shares to the Bill & Melinda Gates Foundation (worth approximately USD 30.7 billion as of June 23 2006) making it the largest charitable donation in history. The foundation will receive 5% of the total donation on an annualized basis each July, beginning in 2006. Buffett will also join the board of directors of the Gates Foundation, although he does not plan to be actively involved in the foundation’s investments.
He, also announced plans to contribute additional Berkshire stock valued at approximately $6.7 billion to the Susan Thompson Buffett Foundation and to other foundations headed by his three children. This is a significant shift from previous statements Buffett has made, having stated that most of his fortune would pass to his Buffett Foundation. The bulk of the estate of his wife, valued at $2.6 billion, went to that foundation when she died in 2004.

His children will not inherit a significant proportion of his wealth. These actions are consistent with statements he has made in the past indicating his opposition to the transfer of great fortunes from one generation to the next. Buffett once commented, “I want to give my kids just enough so that they would feel that they could do anything, but not so much that they would feel like doing nothing”.

The following quotation from 1988, respectively, highlights Warren Buffett’s thoughts on his wealth and why he long planned to reallocate it:

“I don’t have a problem with guilt about money. The way I see it is that my money represents an enormous number of claim checks on society. It’s like I have these little pieces of paper that I can turn into consumption. If I wanted to, I could hire 10,000 people to do nothing but paint my picture every day for the rest of my life. And the GNP would go up. But the utility of the product would be zilch, and I would be keeping those 10,000 people from doing AIDS research, or teaching, or nursing. I don’t do that though. I don’t use very many of those claim checks. There’s nothing material I want very much. And I’m going to give virtually all of those claim checks to charity when my wife and I die. (Lowe 1997:165–166)

Writings

Warren Buffett’s writings include his annual reports and various articles. In his article The Superinvestors of Graham-and-Doddsville, Buffett condemned the academic position that the market was efficient and that beating the S&P 500 was “pure chance” by highlighting a number of students of the Graham and Dodd value investing school of thought. In addition to himself, Buffett named: Walter J. Schloss, Tom Knapp, Ed Anderson (Tweedy, Brown Inc.), Bill Ruane (Sequoia Fund, Inc.), Charles Munger, Rick Guerin (Pacific Partners, Ltd.), and Stan Perlmeter (Perlmeter Investments) as having beaten the S&P500, “year in and year out”.

Source : WIKIPEDIA

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